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StreetAccount Summary - Asian Market Recap: Nikkei (0.03%), Hang Seng (2.61%), Shanghai Composite +0.28% as of 03:10 ET

Mar 05 ,2024

  • Synopsis:

    • Asian equities ended with a negative bias Tuesday. Greater China benchmarks mixed as value stocks and indices notably outperformed growth; Hang Seng sold off across the board with IT under significant pressure but Shanghai's big board touched four-month highs. Mixed day in Japan with Nikkei flat and Topix higher. South Korea stocks sold off sharply but Taiwan was higher again in a mixed day for semis. Australia and India small down, Southeast Asia indices all lower. US futures lower, European bourses down in opening trades. US dollar flat but AUD weaker; yuan and yen flat. Treasury yields down at the long end, higher at the short. Crude lower but still within its recent range. Gold hovering near record highs. Industrial metals under pressure. Cryptocurrencies pushed toward records earlier but now lower.

    • Asia stocks tilted lower as the day progressed Tuesday as China's NPC set an ambitious GDP growth target failed to build sentiment amid early criticism the goal was unrealistic. The congress signaled a budget deficit target of around 3.0%, unchanged from 2023, but economists have already queried how Beijing could hit its growth target with the same budget deficit as 2023, and with economic activity indicators considerably weaker than last year. Hong Kong markets reacted negatively to the announcements, dipping almost 3% at one stage and setting a risk-off environment for the day in the region.

    • Other measures announced by the NPC also underwhelmed. There is to be a marginal increase in local government special bonds and CNY1T of special ultra-long bonds by the central government, both in line with previous announcements. Defense spending is to increase 7.2% and the clause adopting the peaceful reunification with Taiwan was dropped. Incremental measures to boost the property sector via increases in subsidies were announced (but the Hang Seng mainland properties index was sharply lower) and there were pledges for stronger efforts to address financial risks.

    • In other regional economic developments, Tokyo core inflation rebounded above BOJ's 2% target in February, to reflect the phasing out of energy subsidies. China Caixin services PMI showed growth unexpectedly eased. Australia net exports and government spending to make positive contributions to Q4 GDP ahead of full growth data on Wednesday. Thailand's consumer price index showed deflation continuing into a fifth month while Philippine CPI rose on steeper food prices.

    • Kubota (6326.JP) is considering the manufacture of its own batteries for farm machinery EVs. Mitsubishi Corp (8058.JP) has formed a joint venture with Frontier Lithium (FL.CN) to develop a Canadian mine, takes initial 7.5% stake. Country Garden (2007.HK) said its sales had fallen 85% y/y in February, sliding from 75% drop in January; vows to deliver projects with own resources. Tata Motors (500570.IN) says it will split and separately list its passenger and commercial vehicle units.

  • Digest:

    • China NPC headlines largely match expectations:

      • Xinhua reported 2024 GDP growth target was kept at 'around 5%.' Budget deficit target set at 3% of GDP, unchanged from the initial 2023 level, while confirming early media reports of an additional CNY1T in ultra-long special treasury bond issuance marking the start of a multi-year scheme (Xinhua). Local government special bond quota raised marginally to CNY3.9T from CNY3.8T in 2023, within the expected range. CPI inflation target maintained at around 3%, though economists have widely noted this is more of a ceiling than a binding commitment. Government aims to create 12M urban jobs with urban unemployment rate at around 5.5%. Nothing yet on expanded Pledged Supplementary Lending facility, seen by economists as the key measure to come from monetary policy support. Specifics light on broader policies, repeating pledges to expand domestic demand and deepen supply-side structural reforms (Xinhua). Launched a year-long program to stimulate private consumption focused on NEVs, electronics and other big-ticket items. Vowed to address risks in real estate, local government debt and SME sector to safeguard stability (Xinhua). CNY700B ($97B) allocated for investment (Xinhua) though there were no details.

    • Tokyo core CPI in line, government energy subsidies fade:

      • Tokyo core CPI rose 2.5% y/y in February, matching expectations, following revised 1.8% in the previous month. Ex-fresh food & energy inflation was largely stable, up 3.1%, also in line, after revised 3.3% in January. Main factor was energy drags, which narrowed by 0.82 ppt as government subsidies for electricity and gas are phased out. Recall that policymakers were reportedly considering another extension though there have been no meaningful developments. Base effects were another factor as CPI shifted from 4.3% in Jan-2023 to 3.3% in February. Elsewhere, leisure durable goods prices swung positive, while accommodation reaccelerated amid the tourism surge. Offsetting factor was the ongoing deceleration in heavily weighted non-fresh foods. Core goods inflation picked up to 3.1% from 1.5% as utilities are included, far outweighing moderation in food products. Closely watched services inflation remained steady at 2.1%. Tokyo figures point to similar developments on a nationwide basis. Recall core inflation slowed to the BOJ's 2% target for the lowest reading since March 2022. Service inflation was steady though there were some concerns over the lack of incremental momentum.

    • China Caixin Services PMI expands at a slower pace:

      • Caixin services PMI was 52.5 in February, below consensus 52.9 and 52.7 in prior month, and in expansion for 14 consecutive months although business activity expanded at softest pace since December. Service providers signaled a slightly stronger increase in average input costs, contributing to a renewed rise in average selling price. New order growth was little changed from January and remained below 2023 average, while bright spot in foreign demand, which logged biggest improvement since Jun-23. Payroll numbers across China's service sector fell in February on subdued demand conditions with rate of job cuts quickest in over a year. There were signs of weaker pressure on operating capacities which service companies were able to attend to backlogs of work. Business confidence slipped to four-month low as firms remained cautious. Caixin Composite PMI unchanged at 52.5. Economists added China's economy still faces various headwinds, including weak demand and low prices. Measures by policymakers need to aim at stabilizing growth and strengthening market confidence, which would boost employment.

    • StreetAccount Event Preview: Australia Q4 GDP

      • Australian Q4 GDP due out Wednesday, 11:30 AEDT. Growth forecast to have come in at 0.2% q/q, unchanged from Q3 and taking yearly rate down to 1.4% from 2.1%. However, some economists predicting slightly higher growth of 0.3% q/q and 1.5% y/y after final set of GDP inputs showed net exports to contribute larger-than-expected 0.6% while government consumption to contribute 0.1%. Result partially offsets 1% drag from surprise slump in business inventories and appeared to lessen risk of economy contracting in Q4. Household consumption will be the swing factor with economists warning of downside risk following quarterly fall in imports of discretionary goods. Retail turnover also shrunk over Q4. RBA next meets on 19-Mar with central bank widely expected to leave policy unchanged. Market currently pricing in first RBA rate cut in September, though downside GDP surprise seen bringing forward pivot timing.

    • Japan Q4 GDP seen revised to expansion:

      • Narrow Nikkei poll following the MOF corporate survey found consensus looks for Q4 GDP to be revised up to 1.2% q/q annualized growth compared to the first preliminary estimates of a 0.4% contraction. All 10 respondents saw GDP revisions turning positive. Real GDP capex seen revised to 2.4% q/q growth from a 0.2% decline, lifting domestic demand marginally positive. However, optimism was tempered as weaker private consumption and public investment expected to remain unchanged. Flat private inventory contribution (the other main component susceptible to revisions) also seen unrevised. Furthermore, Q1 forecasts remain subdued at a 0.6% q/q annualized contraction with private consumption flat, capex edging lower and external demand a slight net drag. Article reaffirmed auto sector certification falsification scandal as a notable overhang. Still, recall that prior discussions indicated optimism that rebound effects would turn this factor into a headwind in Q2. In terms of implications, there were some thoughts the surprising weakness in the first print would pose a setback against BOJ policy normalization, central bank officials reportedly shrugged off the growth volatility amid concentrated attention on inflation and wage growth.

    • Notable Gainers:

      • +20.6% 1802.JP (Obayashi): upgrades year-end dividend guidance to ¥51.0/share from ¥21.0/share

      • +3.7% 6146.JP (DISCO Corp): to join Nikkei 225, effective 1-Apr

      • +3.2% 500570.IN (Tata Motors): approves demerger and separate listing of its CV and PV business

      • +0.6% 6326.JP (Kubota): reportedly exploring making batteries in-house for electric versions of farm machinery

      • +0.2% 9983.JP (FAST RETAILING CO.): reports February Japan Uniqlo same stores + online net sales +7.2% y/y

      • +0.2% 762.HK (China Unicom (Hong Kong)): reports preliminary FY net income attributable CNY18.7B vs FactSet CNY18.63B

    • Notable Decliners:

      • -5.1% 2007.HK (Country Garden Holdings): reports February contracted sales CNY3.72B; StreetAccount notes year-ago figure was CNY24.85B

      • -2.9% 6862.HK (Haidilao International Holding): to launch franchise model

      • -2.5% 005380.KS (Hyundai Motor): reports February global sales 314,909 units vs year-ago 328,308 units

      • -2.1% 000270.KS (Kia): reports February global sales 242,656 units vs year-ago 254,405 units

      • -0.5% 005940.KS (NH Investment & Securities Co.): CEO/president Jeong Young-Chae reportedly to step down after AGM

      • -0.2% 068270.KS (Celltrion): launches 426K-share on-market buyback, to run from 6-Mar through 5-Jun

  • Data:

    • Economic:

      • Japan February

        • Tokyo core CPI +2.5% y/y vs consensus +2.5% and revised +1.8% in prior month

          • CPI excl. fresh food & energy +3.1% y/y vs consensus +3.1% and revised +3.3% in prior month

          • Overall CPI +2.6% y/y vs consensus +2.5% and revised +1.8% in prior month

        • Final services PMI 52.9 vs preliminary 52.5 and 53.1 in prior month

          • Composite PMI 50.6 vs preliminary 50.3 and 51.5 in prior month

      • Australia

        • Q4 current account balance A$11.8B vs consensus A$5.0B and revised A$1.3B in Q3

          • Net exports to add 0.6 ppt to Q4 GDP vs consensus 0.2 ppt addition and 0.6 ppt subtraction from Q3 GDP

      • South Korea

        • Q4 revised GDP +0.6% q/q vs preliminary +0.6% and +0.6% in prior quarter

          • GDP +2.2% y/y vs preliminary +2.2% and +1.4% in prior quarter

      • Singapore January

        • Retail sales nominal y/y +1.3% versus (0.5%) in prior month

    • Markets:

      • Nikkei: (11.60) or (0.03%) to 40097.63

      • Hang Seng: (433.33) or (2.61%) to 16162.64

      • Shanghai Composite: 8.49 or +0.28% to 3047.79

      • Shenzhen Composite: (10.21) or (0.59%) to 1718.31

      • ASX200: (11.60) or (0.15%) to 7724.20

      • KOSPI: (24.87) or (0.93%) to 2649.40

      • SENSEX: (29.45) or (0.04%) to 73842.84

    • Currencies:

      • $-¥: (0.18) or (0.12%) to 150.3490

      • $-KRW: +2.45 or +0.18% to 1334.4900

      • A$-$: (0.00) or (0.41%) to 0.6484

      • $-INR: (0.10) or (0.13%) to 82.9137

      • $-CNY: (0.00) or (0.02%) to 7.1981

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